Which of the following describes how the Federal Reserve could use tools of monetary policy to decrease the money supply?
A) Increase the reserve requirement, increase the discount rate, and sell bonds.
B) Increase the interest rate that the Federal Reserve pays on bank deposits, increase the discount rate, and buy bonds.
C) Decrease the reserve requirement, increase the discount rate, and sell bonds.
D) Decrease the reserve requirement, decrease the discount rate, and decrease the interest rate that the Fed pays on bank deposits.
Correct Answer:
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